Authors
Abstract
In this paper, the effect of trade volume on TEPIX index is investigated based on bull and bear cycles of Tehran stock Exchange (TSE) using nonlinear Markov-Switching model. In this regards, monthly data of TEPIX and trade volume of TSE is used for the period of the first month of 1381 to the ninth month of 1391. The results show that, there is significant nonlinear relationship between trade volume and TEPIX index. Trade volume has positive and significant impacts on TEPIX in both bull and bear regimes but these effects is higher in bull regime. Based on the results, it is expected that increase in trade volume leads to growth in TEPIX index in both bull and bear regimes. However, comparing results with historical evidences shows that Markov-switching model properly fits the bull and bear cycles of TSE. On the other hand, the results of Robustness tests emphasis adequacy and good performance of Markov-Switching model. Based on MAE criterion, the Markov-Switching model has more accurate performance for in-sample fitting and out-of-sample forecasting than ARIMA and VAR models.
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